You notice that whenever incomes rise by 5 percent, people buy 3 percent more of Good A. This suggests that Good A has a negative income elasticity of demand.

Question

Quizplus · Accepted Answer

The statement contradicts the concept of income elasticity of demand. If people buy more of Good A when their incomes rise, then Good A has a positive income elasticity of demand. A negative income elasticity of demand means that people buy less of a good as their incomes rise.

You Notice That Whenever Incomes Rise by 5 Percent, People